10. Gerald had beginning total stockholders' equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Gerald's net income was $180,000. No additional investments were made; however, dividends did occur during the year. How much were the dividends?
20. The basic sequence in the accounting process can best be described as:
a. Transaction, journal entry, source document, ledger account, trial balance.
b. Source document, transaction, ledger account, journal entry, trial balance.
c. Transaction, source document, journal entry, trial balance, ledger account.
d. Transaction, source document, journal entry, ledger account, trial balance.
25. Blankenship Company pays its employees every Friday for work rendered that week. The payroll is typically $10,000 per week. Blankenship's year-end occurred on Wednesday, at which time a correct adjusting entry was recorded. On the following Friday, which of the following payroll journal entries should be recorded?
a. Salary Expense 10,000 Cash 10,000
b. Salary Expense 4,000 Salary Payable 6,000 Cash 10,000
c. Salary Expense 6,000 Salary Payable 4,000 Cash 10,000
d. Salary Payable 10,000 Cash10,000
27. At the end of the current accounting period, Johnson Company failed to record utilities consumed during the period. Johnson will be billed for the utilities during the next accounting period. As a result, current period assets, liabilities, equity, and income, respectively, are:
a. Overstated, overstated, correct, correct
b. Correct, understated, overstated, overstated
c. Overstated, understated, overstated, overstated
d. Overstated, understated, correct, correct
28. On November 1, 20X1, Limit Company purchased a one-year insurance policy for $12,000. Limit
Company debited Cash and credited Prepaid Insurance for $12,000. At the end of December, 20X1, $2,000 of insurance had expired. The journal entry to properly state all accounts involved on December 31, 20X1, would be:
a. Insurance Expense 2,000 Prepaid Insurance 22,000 Cash 24,000
b. Insurance Expense 2,000 Prepaid Insurance 2,000
c. Insurance Expense 2,000 Cash 2,000
d. Prepaid Insurance 2,000 Insurance Expense 2,000
34. After closing all revenue and expense accounts, Norris Company had a debit balance in its Income Summary account of $10,000. The proper entry to record the closing of the Income Summary account would be:
a. Revenue 10,000 Income Summary 10,000
b. Retained Earnings 10,000 Income Summary 10,000
c. Income Summary 10,000 Retained Earnings 10,000
d. Income Summary 10,000 Expenses 10,000
45. Lux had net purchases of $50,000, ending inventory of $25,000, net sales of $100,000, and gross profit of $32,000. How much was Lux's beginning inventory?
46. On February 1, Crown Company purchased $2,000 of merchandise, terms 2/10, n/30. Crown uses the gross method of recording purchases. Payment of the accounts payable was made on February 26. Which of the following journal entries is appropriate for the February 26 transaction?
a. Purchases 2,000 Accounts Payable 2,000
b. Accounts Payable 1,960 Cash 1,960
c. Accounts Payable 1,960 Purchases Discounts Lost 40 Cash 2,000
d. Accounts Payable 2,000 Cash 2,000
48. Dodd Company utilizes the periodic inventory accounting system. Dodd had beginning inventory of $59,000, ending inventory of $37,000, and net purchases of $123,000. Which of the following components should be included in the year-end closing entries prepared by Dodd?
a. Purchases 123,000
b. Income Summary 37,000
c. Income Summary 59,000
d. All of the above
59. During its first year of operation, Lenton Company acquired three investments in trading securities. Investment A cost $50,000 and had a year-end market value of $60,000. Investment B cost $35,000 and had a year-end market value of $17,000. Investment C cost $26,000 and had a year-end market value of $24,000. What amount should be reported as a charge against income in Lenton's income statement for the first year of operation?
5. Branz Company had credit sales during the current year which amounted to $700,000. Historically, 3% of credit sales are uncollectible. If Branz uses the allowance method of recording uncollectible accounts, a proper journal entry for the year would be:
a. Accounts Receivable 21,000
Allow. for Uncollectible Accounts 21,000
b. Uncollectible Accounts Expense 21,000
Accounts Receivable 21,000
c. Uncollectible Accounts Expense 21,000
Allow. for Uncollectible Accounts 21,000
d. Allow. for Uncollectible Accounts 21,000
Accounts Receivable 21,000
79. Gerber Department Store utilizes the retail inventory method. Gerber's beginning inventory cost
$140,000 and retailed for $280,000. Purchases for the period amounted to $390,000 and were priced to sell at twice that amount. Sales for the period, all at normal retail, were $600,000. How much is the cost of Gerber's estimated ending inventory?
80. Wonder Corporation failed to record the purchase of merchandise on account. The merchandise and related accounts payable should have been recorded but were not. What is the effect of these errors on assets, liabilities, retained earnings, and net income, respectively?
a. Understated, understated, no effect, no effect
b. Understated, understated, understated, understated
c. Understated, overstated, overstated, understated
d. Overstated, overstated, understated, overstated
85. On June 1, Pennell Corporation purchased $100,000 of 9%, 5-year bonds. The bonds are dated June 1, 20X1. The bonds were issued at 96, and pay interest on December 1 and June 1. The entry to record the investment in bonds is:
a. Investment in Bonds 100,000
b. Investment in Bonds 96,000
c. Investment in Bonds 104,000
d. Investment in Bonds 96,000
Interest Income 4,000
86. On April 1, 20X1, Collinge Corporation purchased $100,000 of 7%, 5-year bonds dated April 1, 20X1, at 101. Interest is paid on March 31 and September 30. Assuming use of the straight-line amortization method, the proper amount of income to record on September 30, 20X1 is:
87. On January 1, 20X2, Miller Corporation purchased $100,000 of 5%, 10-year bonds dated January 1, 20X2, at 98. Interest is paid on June 30 and December 31 of each year. Assuming use of the straight-line amortization method, the proper amount to report for Investment in Bonds at December 31, 20X3 is:
92. Lancer Corporation purchased a parcel of land as a factory site for $150,000. Construction began immediately on a new building. Costs incurred are as follows:
Legal fees for land purchase contract
Lancer should record the cost of the new land and building, respectively, at:
a. $150,000 and $275,000
b. $152,000 and $275,000
c. $150,000 and $250,000
d. $152,000 and $250,000
93. Reno Acquisitions Company recently bought a furnished hotel for a lump-sum purchase price of $15,000,000. Separately, the land was valued at $6,000,000, the building at $12,000,000, and the furniture and equipment at $2,000,000. How much cost should Reno assign to the land?
96. Realistic Company purchased a new truck on January 1, 20X1. The truck cost
$20,000, has a four-year life, and a $4,000 residual value. The company has a December 31 year-end. If Realistic Company depreciates the truck by the straight-line method, how much should Realistic report as the book value of the truck at the end of 20X3?
97. On July 1, 20X1, Clem Company purchased factory equipment for $50,000. Residual value was estimated to be $2,000. The equipment will be depreciated over ten years using the double-declining-balance depreciation method. Clem has a December 31 year-end, and during 20X1, one-half of a year's depreciation expense was recorded. How much depreciation expense should be recorded for 20X2? (round computations to the nearest dollar)
99. On July 1, 20X1, Robinson Company purchased a new machine for $200,000. The machine is estimated to have a service-life of 10 years with an estimated residual value of $5,000. Robinson uses straight-line depreciation. During 20X5, it became apparent that the machine would not be efficient to operate after December 31, 20X7. Furthermore, the machine would have no scrap value. How much should be charged to depreciation expense in 20X5 under generally accepted accounting principles? (round computations to the nearest dollar)
102. On January 1, 20X2, Lynn Corporation purchased a machine for $100,000. Lynn paid shipping expenses of $1,000 as well as installation costs of $2,400. The machine was estimated to have a useful life of ten years and an estimated salvage value of $6,000. In January 20X3, additions costing $7,200 were made to the machine. These additions significantly improved the quality of output, but did not change the life or salvage value of the machine. If Lynn records depreciation under the straight-line method, depreciation expense for 20X3 is:
116. Landry paid $5,000 cash for warranty service work. If a Warranty Liability account had been previously established, the proper journal entry to record the service work would be:
a. Sales 5,000
b. Warranty Expense 5,000
Warranty Liability 5,000
c. Warranty Expense 5,000
d. Warranty Liability 5,000
120. The gross payroll for Zurich Corporation was $100,000. Federal income tax withheld from employee paychecks amounted to $24,000, state income tax withheld amounted to $3,000, Social Security amounted to $8,500 (both the employee and employer portion), and Medicare amounted to $3,500 (both the employee and employer portion). Furthermore, employees elected to have $1,000 of insurance and charitable contributions withheld from their paychecks. How much was net pay?
123. Assume that Kamchatny Vladimir borrowed $100,000 on January 1 of Year 1, at 5% interest per annum. On December 31, of Year 1, an $8,000 payment is made. On December 31, of year 2, another $8,000 payment is made. Using normal assumptions about interest and principal reduction, how much is the unpaid balance of Vladimir's loan after the second payment?
126. On June 1, Surge Corporation issued $100,000 of 9%, 5-year bonds. The bonds are dated June 1, 20X1. The bonds were issued at 96, and pay interest on December 1 and June 1. The entry to record issuance of the bonds is:
a. Cash 100,000
Bonds Payable 100,000
b. Cash 96,000
Discount on Bonds Payable 4,000 Bonds Payable 100,000
c. Cash 104,000
Bond Interest Payable 4,000 Bonds Payable 100,000
d. Cash 96,000
Bond Interest Expense 4,000
130. Billings Corporation retired $1,000,000 face of bonds payable. At the time of the retirement, the bonds had unamortized discount of $20,000, and all interest accruals and payments were current. Under the outstanding covenants, Billings was required to pay the bond holders 103.
a. The transaction caused Billings to recognize a loss of $50,000.
b. The transaction caused Billings to recognize a gain of $50,000.
c. The transaction caused Billings to recognize a loss of $30,000.
The transaction caused Billings to recognize a gain of $20,000.